Private markets offer a unique opportunity for investors to delve deep into companies and projects, but like any investment, there are risks involved. Aspiring professionals looking to invest in private markets should be aware of the risks and how to react when they occur.
One way to mitigate these risks is to assess the most likely risk associated with the company or project and implement legal protections such as covenants, collateral, cash-sweep mechanisms, liquidity triggers, reserve accounts, and alternative exit strategies. Diversifying portfolios is also essential to avoid over-exposure to a single investment.
But what happens when a downside occurs, such as a default? While there is no predefined route, a sound course of action is to collaborate with the company and activate any legal agreements or triggers within them to safeguard the investment. A joint effort with other stakeholders may also yield better results.
At Oxbright, we understand the importance of navigating downside risks in private markets. Our team of experienced professionals can guide you through the process, helping you assess risks, diversify portfolios, and implement legal protections. With our expertise, we can help you turn risks into success.
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